ITP Glossary: Guaranteed Salary

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Guaranteed Salary

An NFL player’s salary is not guaranteed unless explicitly stated in an addendum to the standard player contract. A guaranteed salary protects the player’s salary from one or more of the football reasons a team can terminate a player. Those three reasons for release are referred to as skill, injury, and salary cap termination.

Reasons for Release

The most common reason for release is skill, which generally means the team doesn’t think a player is good enough to be a member of the team. This is a completely subjective decision and can be made at any point during the duration of the contract. An injury release means that a player has failed to maintain their condition such that they could pass an NFL physical. A salary cap release, which is rare, indicates that the team believes they can improve the team by signing other players and a player’s cap charge prevents the team from having enough salary cap space to sign those other players.

Types of Guarantees

When a player has their salary guaranteed it is guaranteed for one or more of these reasons for termination. A full guarantee protects the salary from all three forms of termination. In the event that the player is released they will still collect their guaranteed salary. Because of the subjective nature of a skill termination, a skill guarantee is the most powerful of the individual guarantees. The CBA contains an archaic rule that forces a team to pre-fund any future skill guarantee which has given teams leverage not to include them beyond the first or second year.

The most common guarantee is an injury guarantee. Injury guarantees do not require funding by the team and are rarely collected on. A player only collects on that guarantee if they can’t pass a physical; the majority of injuries will heal to the point where a player can pass a physical and are not career threatening. Injury guarantees almost always go uncollected at the time of the release, as most players are released for skill rather than injury.

Vesting Guarantees

Many injury guarantees eventually become full guarantees at a date sometime after the contract is signed, these are called vesting guarantees. If the player is on the roster on a certain date, generally the 3rd or the 5th day of the league year, the injury guarantee converts to a full guarantee. This mechanism prevents teams from having to pre-fund the guarantee from day one and gives the team some leeway to release a player drastically underperforming their contract. The earlier the vesting date the more player-friendly a contract is. The later the date the more team-friendly the contract is.

Looking at Giants defensive end Olivier Vernon’s five-year, $85 million contract from the 2016 offseason, observe the difference between his guarantees and full guarantees.

In his contract, $40 million is fully guaranteed at signing, including $20 million in the form of a prorated signing bonus. However, the entire contract contains $52.5 million in total guarantees, and the remaining $12.5 million in guarantees becomes fully guaranteed on the fifth day of the 2018 league year as he enters the third year of his contract.

It is important to note that a guarantee can be voided by conduct off the field. Most teams use common contract language that will void any and all future guarantees for drug or performance-enhancing drug suspensions, as well as conduct detrimental to the team. Holding out from training camp and failing to report to mandatory offseason sessions will also void guarantees.

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